Fuel prices reach historic high as government ends subsidy

The new fuel prices are a historic high in Kenya. [File, Standard]

The prices of fuel in Kenya have reached a historic high after the government discontinued the fuel subsidy programme that has offered relief to motorists over the last one year.

In Nairobi, a litre of petrol will retail at Sh179.30, while a litre of diesel will go for Sh165.00.

A litre of kerosene will be sold at Sh147.94 starting Thursday, September 15.

The new prices remain in force for the next one month.

This marks the first time the government is withdrawing the relief scheme that has cost more than Sh100 billion.

In his inaugural speech on Tuesday, September 13, President William Ruto said the fuel relief scheme would be discontinued because it was causing a serious dent on Kenya's economic buoyancy.

Last month, the government said it would pump more money into the fuel subsidy.

The State said the move would save consumers from spending more than Sh200 per litre on the three petroleum products.

The Energy and Petroleum Regulatory Authority (EPRA), in the price capping guide for August to September said pump prices for super petrol, diesel and kerosene would remain at the same levels as it was in July 2022.

EPRA said it had been forced to further stretch its finances by increasing its spending on the subsidy.

"The applicable prices for this cycle have been maintained as the ones applicable in the immediate previous cycle. The government will utilise the Petroleum Development levy to cushion consumers from the otherwise higher prices," said EPRA in a statement.

Previously, disclosures by the Petroleum ministry showed that spending on the subsidy had, over some months, been in excess of Sh15 billion.

The industry regulator said there was an increase in the cost of crude oil globally. Locally, the shilling continued its losing streak, further weakening against the US dollar over the month of July and August.

This, in turn, led to an increase in the average landed cost, which is the cost of fuel when it lands in Kenya before costs such as taxes, inland transport and marketers' margins.

The State has been subsidising motorists from the high cost of fuel since April 2021.

It had spent more than Sh100 billion in a scheme, where it paid the oil marketing companies to stabilise pump prices.

In July, the State authorised the use of an additional Sh16.68 billion for fuel subsidy.

The fuel subsidy had enabled Kenyans to save more than Sh100 billion that they would have spent on the commodity.

The International Monetary Fund (IMF) had been pushing for its scrapping. In a July report, the institution said National Treasury had agreed to do away with the programme and would be slowly pulling out and allowing local prices to reflect the market realities such as the high crude oil cost and weak shilling.